Hikes to CPP could bring costs

CPP changes means businesses may have less money to invest back into firms, says Richard Truscott, Alberta director for the Canadian Federation of Independent Business.Photo by
Ted Rhodes/file

Momentum to hike Canada Pension Plan (CPP) premiums appears to be gaining traction, but such a move would also have large costs across a number of areas, according to the Canadian Federation of Independent Business (CFIB). The last round of talks among provinces and the federal government to explore increasing CPP premiums came in December. However, there was no overall consensus with the provinces and Ottawa essentially blaming each other for the lack of a decision on the contentious issue.

"Right now there's a lot of finger-pointing going on, but by no means is the issue going away," says Richard Truscott, Alberta director for the CFIB.

It's clear many Canadians - largely middle-class workers - are not saving enough for retirement, but the issue of how to address that problem varies widely.

A recent public opinion poll conducted for the CFIB by Angus Reid Global shows only 18 per cent of working Canadians see CPP and QPP increases as one of the best ways to solve the challenge. Tax cuts (54 per cent) incentives (47 per cent) and improved voluntary options (35 per cent) were cited as better alternatives.

"Finance ministers should be asking if mandatory CPP/QPP hikes are a good idea, not just when is the right time to introduce them," said Dan Kelly, president of the CFIB. "Although governments have been talking about this for years, no one has ever stopped to ask Canadians if they support the idea."

Some provinces, most notably Ontario, have already started considering setting up some form of a provincial-level form of pension plan, which would put Ontario businesses at a disadvantage compared to other provinces, said Truscott.

The result of such changes would mean business owners have less money to invest back into their companies, hire new workers and pay salary increases or benefits to existing workers, he added. It would also mean workers would have less takehome pay for things such as food, rent, mortgage or other savings, such as registered retirement savings plans (RRSPs).

In the CFIB survey, about three-quarters of small business owners said they would be forced to freeze or cut salaries in the face of a CPP/QPP hike.

"Canadians and their employers are not saving more for retirement because they simply can't afford to," said Laura Jones, CFIB executive vice-president. "In the public poll, and a similar survey of CFIB members, 65 per cent of Canadians and 61 per cent of small business owners said so."

Alberta and other provinces passed legislation in 2013 to pave the way for a new system of pooled registered pension plans to address the issue, which are voluntary employer-led programs.

"That's certainly a good option for many Canadians, but at the end of the day people are going to have to step up and make decisions about their own retirement. There are plenty of options out there ... but you've got to make the commitment to see it happen," Truscott said.

A combination of CPP/QPP, RRSPs, old age security (OAS), the guaranteed income supplement and cash savings are all viable options to secure a comfortable retirement, he adds.

Governments in Ontario, Newfoundland and Labrador, Prince Edward Island (PEI) and Manitoba have all supported increasing CPP premiums, while Saskatchewan has spoken out against such changes. Yet there was little support for mandatory CPP/QPP hikes across every region.

Alberta's former finance minister, Ted Morton, previously came out against the increases, although Premier Alison Redford has suggested the province is open to discussions about the option.

"It's back on the table, it appears," Truscott said. "We think there needs to be an important conversation held with Canadians and small business owners about what exactly the problems are and what are some of the potential solutions."

Whatever the various governments involved will or will not do remains to be seen, however the implications for Canadian workers and business owners are very real.

"This issue is not going away and it's going to be with us for several years to come," said Truscott.

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